Benefits of a Disability Insurance Plan Disability Insurance Benefits

Insurance for your business is expensive. What if there was a product out there that would provide significant benefits to your employees while saving your business money? Sounds too good to be true? Well a gap or disability policy plan can provide a significant safety net to your employees and provide tax savings to your business.
Disability or gap plans are insurance products designed to supplement traditional health insurance plans. The disability plan typically offers the following benefits that do not exist with traditional health insurance:

• Income Replacement - While the employee cannot work, the plan would provide replacement income.
• Out-of-Pocket Expense Payments - Deductibles, co-pays, out-of-network costs, and a myriad of other out-of-pocket expenses confront seriously ill or injured employees.
• Short or Long-Term Disability Coverage - Benefits are paid in the case of a short or long-term disability.

Plans are presented to your employees as a series of options designed to address what the employee can afford in coordination with their age, family status, income level and other factors. The employee makes this determination. AFLAC (the company with the duck) is probably the best known to employees. The company has been around for over fifty years and its website is very informative. AFLAC's approach to presenting disability and gap plans is to point out to the employer that the plan will be administered by the insurer, paid for by the employees, and resulting in a savings to the company. Often the employer will contribute some level of benefits though, so the idea that it will be cost free to the employer is not always the case. But, it is still an excellent benefit to offer.
Tax savings are achieved because the employee can contribute to the premiums on a pre-tax basis. This is a huge advantage. Because the contributions are pre-tax, the employer realizes a lower taxable payroll for FICA and FUTA purposes. Thus, the employer pays less FICA and FUTA taxes. Generally, for every $1,000 in pre-tax premium towards the plan, and resulting lower payroll, the employer would save roughly $76.50 in FICA and FUTA payroll taxes. Consult with your tax advisor for specifics to your situation.
Employees receive a similar tax savings. As the premiums are withheld pre-tax, their tax withholding for that pay period and overall tax liability is less. Along with the tax savings, the employee receives a significant benefit in the form of a solid safety net for their family.
Disability and gap plans can provide significant benefits for your employees and promote employee retention and loyalty.